- Mitchells & Butlers reports 18% fall in profits as fall in the pound pushes up costs.
- Shares fall 10% at the open but have since recovered slightly.
LONDON – Shares in pub and restaurant owner Mitchells & Butlers are falling on Thursday morning after the company reported a steep fall in profits and warned of Brexit-related headwinds.
Mitchells & Butlers, which owns chains such as All Bar One, Toby Carvery, Harvesters, and Nicholson’s pubs, said that pre-tax profit for the year fell 18% to £77 million. Revenue rose 4.5% to £2.1 billion but rising costs meant the company failed to capitalise on rising sales.
“Cost headwinds across the industry have adversely affected margins but we continue to work hard to mitigate as much of these as possible through our focus on efficiency and profitable sales growth,” CEO Phil Urban said.
Mitchells & Butlers blamed the “unprecedented cost headwinds” on the collapse in the value of the pound after last year’s Brexit referendum. The pound fell to a 31-year-low against the dollar and a 7-year-low against the euro in the wake of the June 2016 vote.
The company also warns that Brexit could impact its business in three key ways in the future:
- by depressing consumer confidence;
- changes in employment and immigration laws;
- and further changes in sterling impacting on input costs.
Mitchells & Butlers’ share price fell 10% at the open in London and remains over 8% lower at 9.30 a.m. GMT (4.30 a.m. ET).
Mike van Dulken, head of research at Accendo Markets, said in an email: “Investors are clearly focusing on cost issues affecting the whole industry. These include the living wage, business rates, apprenticeship levy, sugar tax, restaurant discounting, changes in consumer habits (eating out less frequently, but spending more) and Brexit uncertainty.
“An early decision not to pay an interim dividend, pending a year-end assessment, also suggests a murky outlook that is sapping management confidence.”
Mitchells & Butlers’ warning on rising costs comes in stark contrast to JD Wetherspoon. Tim Martin, the founder of the pub chain and a staunch Brexit supporter, said that a “hard Brexit” would “reduce the average cost of a meal by about 3.5 pence and the cost of a drink by 0.5 pence” at one of his pubs.
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